INTANGIBLE ASSETS – RIGHT-TO-USE SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS (SBITA) - 8615.5

(New: 08/2024)

 

Governmental Accounting Standards Board (GASB) Statement No. 96 establishes uniform accounting and financial reporting requirements for subscription-based information technology arrangements (SBITAs). A SBITA that meets the scope of GASB Statement No. 96 results in a right-to-use SBITA asset, an intangible capital asset. The asset represents the right to use an information technology (IT) asset identified in a SBITA contract. For information on internally generated intangible assets, see SAM Section 8615.3.

Agencies/Departments shall recognize the intangible right-to-use SBITA asset when:

• The contract conveys control of the right to use another party’s (i.e., a SBITA vendor’s) IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.
• The minimum noncancelable contract term is greater than 12 months.
• There is $50,000 or more in total upfront or future subscription payments.
• The underlying IT assets are used to conduct state business.

Agencies/Departments will recognize right-to-use SBITA assets using the same criteria above when an aggregate of similar assets are consolidated into one SBITA, but only when they are subscribed at the same time with an identical vendor.

The following SBITAs are excluded from this policy:

• Contracts that convey control of the right to use another entity’s combination of IT software and intangible capital assets that meet the definition of a lease in GASB Statement No. 87, in which the software component is insignificant when compared to the cost of the underlying asset. For information on right-to-use lease assets, see SAM Section 8615.4.
• Governments that provide the right to use their IT software to other entities through SBITAs (e.g., interagency agreements or obtaining the software through another state department).
• Contracts that meet the definition of Public-Private and Public-Public Partnerships in GASB Statement No. 94.
• Licensing arrangements that provide a perpetual license. For information on leased software licenses, see SAM Section 8615.1.
• A short-term SBITA that has a maximum possible term of 12 months at the commencement of the subscription term, including any options to extend, regardless of their probability of being exercised. Payments for short-term SBITAs are expensed in the period incurred.

For detailed information on accounting and reporting SBITAs in compliance with the GASB Statement No. 96, see the SCO's GASB 96 Reporting Instructions webpage.

Measurement of Right-To-Use SBITA Asset

Agencies/Departments shall measure and record the right-to-use SBITA asset at the present value of payments expected to be made during the subscription term, discounted using the implicit interest rate stated by the SBITA vendor or in the SBITA contract. If the implicit interest rate is not stated, use the GASB Statement No. 96 incremental borrowing rate on the State Controller's Office (SCO) website. Related costs include payments associated with the SBITA contract made to the SBITA vendor prior to or at the commencement of the subscription term or capitalizable initial implementation costs, related to placing the SBITA asset into service, less any incentives. For costs incurred during the application development stage of internally generated or modified computer software, see SAM Section 8635. Agencies/Departments should amortize the right-to-use SBITA asset over the shorter of the subscription term or the useful life of the underlying IT assets.

Accounting for Right-To-Use SBITA Asset

Agencies/Departments shall record the right-to-use SBITA asset using Account No. 1624100, (Legacy Account No. 2418) Right-To-Use Subscription-Based Information Technology Arrangements (SBITA) - Amortizable. For further information on accounting for right-to-use SBITAs, see SAM Section 8632.1.